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“From a net worth of less than zero at the age of 27 to financially independent at the age of 40, on a salary that never exceeds $70,000 a year, is it possible? Well, he’s not there yet but he is a third of the way there and he’s on track following the plan.”

[INTRODUCTION]

[0:00:37] JS: Welcome to the Radical Personal Finance Podcast. My name is Joshua Sheats and I’m your host. Today is Wednesday, November 5, 2014 and this is Episode 96 of this show. Today, I have an interview for you with Jason Fieber, founder of Dividendmatra.com. Jason is well on it’s way to financial independence and he is pursuing a strategy of dividend growth stock investing, has a lot to say about dividends. I think you’ll benefit and learn a lot.

One of the things that I love about finance, what has always intrigued me and interested me about finance is that there are so many different ways to achieve financial independence. I love just the variety. There are people who achieved financial independence in entrepreneurship, in investing, just in so many different ways. And some of them are just incredibly wacky and far out and some of them are relatively main stream and proven and time tested and time warn.

Today, we’re going to get a chance to talk with Jason about dividend investing and dividend investing is a well proven path to financial independence. There’s nothing about dividend investing that you cannot do yourself and Jason is a great resource. He was suggested to me by a previous interviewee on the show and wow, this is a really great interview. I think you’re really going to learn a lot.

We’re going to talk about his personal story from waking up deeply in debt and not making any progress, what were the factors that woke him up and then helped him developed an investment plan and how has he gone on to become, if not an expert at least a knowledgeable individual around dividend investing. I think many of you will be interested and learn from this approach and from this basic information on dividend growth stock investing.

So I hope that you enjoy it. It’s a great interview. Jason is a really good guy, he writes a lot on his website but he doesn’t hold back anything on today’s show. So I hope that you enjoy this interview and I’ll be back at the end to wrap up the show.

[INTERVIEW]

[0:02:39] JS: Jason, welcome to the Radical Personal Finance Podcast. I appreciate you making time to be with us today.

[0:02:46] JS: I am excited because I have gotten a lot of questions about dividend investing on the show but I am not a dividend investor. And although I’m probably qualified to answer maybe some of the questions in a technical sense, I thought that this would be a good way to introduce the subject for those who are interested.

So where I’d love to start is share with me a little bit about your story surrounding money and especially if there were any transitions in your life and how maybe you became interested in investing as a discipline and something that was appropriate for you.

[0:03:23] JF: Well, my story starts out a number of years ago. I was 27 years old and I found myself kind of lost as sea basically, just floating out in life and the ups and downs of life and I felt like a cork in the ocean. I’d had no real control over my destiny and I was working a lot of hours. I was working in the auto industry as a service adviser at a car dealership and I was making okay money.

I’ve never made a lot of money. I’ve never made over $70 grand a year in my entire life so when I was 27, I was making around $30 grand a year or so in the auto industry and I had an epiphany, if you will. I was in Michigan at the time where I was born and raised. I was born and raised in Detroit and I kind of had an epiphany around this time where I discovered that I was actually worth less as a 27 year old man than I was as a baby.

So as a three month old baby, I can’t walk, I can’t talk, I can’t feed myself, I had no control over my bodily movement and yet I was worth zero dollars. I had no income, I had no expenses, I had no assets, I had no liabilities, right? So there is nothing in the balance sheet. I had no balance sheet. At 27 years old, I was worth about -$19,000 or so after you factor in the student loans I took out to go to college and the amount of assets I had which were really nothing. Other than just a little bit cash I had in the bank.

So at 27 years into my life, probably a third or maybe a quarter of my life lived. I was worth the negative amount of money which was really horrible so I decide to get my acting gear. I moved down to Florida for a number of reasons. At this time, this was 2009, the economy was obviously horrible and metro Detroit is the epicentre of some of these issues with the auto industry and everything else and I happen to be working in the auto industry in 2009 so you can’t write it any better than that.

[0:05:30] JF: So the place of employment I was working at the time fired me along with a number of people were let go. So I actually ended up moving to Florida for a number of reasons, specifically or more to the point, the economy down there was better at the time due to tourism. They weren’t heavily concentrated on the auto industry manufacturing. So their economy in general was better.

Unemployment rate wasn’t quite as bad and in addition to that, I started getting gears moving in my head around this time about what I wanted in life and where I was really going and so I figured out that, “Hey, I’ve got to start living below my means.” I have to start creating some kind of gap between my income and expenses to where I can take that capital and start to do something with or else I’ll never going to get out of this hole.

I got to start digging my way out here and I need a shovel and that shovel’s capital, right? So Florida offered me a number of opportunities. It had a great climate so I have it in my head, “Hey, maybe it’s possible to get rid of my car for a while, live car-free.” That was a huge chunk of my expenses and I started to think of things as the big three; so housing transportation and food and so transportation was one of them.

Florida offered a great climate to be able to bicycle and maybe get around by bus. It’s easier to wait for a bus when it’s not 20 degrees outside and there’s eight inches of snow. So 75 to 80 degree weather and palm trees around, I don’t mind waiting 15 minutes if the bus is a little late. So that was obviously another thing.

Free entertainment, the beach is found here it’s free to go out there, enjoy some of the nature’s best, so that was also another aspect of it. But at any rate, that was around the time I started figuring out what I was doing and it was a big change in my life. Also, one last point, Florida doesn’t have any state income taxes. Michigan state income tax at the time was 4.35%, I think it’s been reduced now to 4.25%.

[0:07:25] JF: Yeah, well it’s something although I wasn’t making a lot of money, it’s something that I figured if I can keep a little more what I make it’s another couple $100 here and there.

[0:07:35] JS: What I meant, well excuse me, was not the difference between Michigan and Florida. Yes, 4% is a difference. What I meant was the difference between 4.35% and 4.25%, that’s going to stimulate the economy.

[0:07:49] JF: Yeah, well the governor will let you know all about that, “Hey, I reduced it. I reduced it down from 4.35 to 4.25, so please elect me again,” right?

[0:08:18] JS: Okay, so I live in West Palm Beach and I’ve never understood why don’t people consider the state and especially I think it’s happening more and more but there are a number of very nice states that have no state income tax and everyone is worried about had increase their income, there is a 4.50 increase in income right there and that matters.

[0:08:40] JF: It does. It does, and people think that there’s no free lunch in life and I agree with that to a point. But I’ll tell you this is just personal, this is just anecdotal, but when I moved to Florida, the auto dealership that I eventually found a job at, first of all paid substantially more than the one that I was working at in Michigan.

So, “Oh well you don’t pay the taxes but you’ll make less money,” or, “Oh, well you don’t pay the state income taxes but you’ll get on the sales tax.” That’s not really true and just a quick point on that, Michigan sales tax and Florida sales tax are the same. Now, there is an additional county tax in certain counties here in Florida but 6% is the same, so there is a free lunch there. Property taxes in addition are very similar in Michigan and Florida.

So it’s really just an immediate raise. I mean people argue that point and, “Oh it all depends on your situation and everything else,” and I agree with that. I mean it’s obviously not easy to move half way across United States to get a slight boost in your taxes. I understand that, but I was young and I had an opportunity there and Michigan was into a degree is dying so Florida offered a lot of opportunities that I really wouldn’t have had up there.

[0:09:49] JS: Right and just looking at depending on the industry, if I were going to sell a Mercedes, you’re going to sell a lot more Mercedes in West Palm Beach or Palm Beach Garden in Florida than you are in Michigan. And if you’re going to sell cars, you’re going to make more money doing that in an environment where almost all of the rich people I know maintained residence in Florida.

That’s the reason why we’ve got Palm Beach Island and Jupiter Island and Miami. I mean there’s more wealth down here because of the tax benefits and the wealth drives the economy. So I don’t know? It makes sense to me but somehow, yeah I get it. I don’t want to leave so I don’t want to move somewhere else but I understand why it’s hard for people to consider it but you really can. It’s such a valuable, easy form of geo-arbitrage.

[0:10:38] JF: Right and to another point of the arbitrage, there is wealth arbitrage there as well. So like I said, I started making more money right out of the gate and that was because of your point there. There is certainly more wealth in Sarasota and in West Palm Beach than there is outside metro Detroit, Michigan. It’s just a fact.

I mean there are certain bubbles there and certain suburbs in metro Detroit like Bloomfield Hills and West Bloomfield and Birmingham and what not but in terms of the overall wealth and in terms of my personal experience working in the same exact industry at the same exact type of cars, there is a substantial difference in terms of traffic and everything else.

So that was a form of arbitrage for me. I said, “Hey, if I can simultaneously increase my income by working in a place where there is more wealth and more action coming my way, while simultaneously decreasing my taxes and my expenses by A, factoring out state income taxes and B, getting rid of my car and maybe living somewhere cheap and everything else,” that created this huge gap for me and that’s really what happened.

[0:11:40] JS: How did you go about, once you decided, “Okay, I need to build some margin, I’m going to make some of these decisions,” when did that lead into a wealth plan, thinking through your investment portfolio and how to control that?

[0:11:53] JF: That was early 2010. So in June 2009 I moved to Florida and it was about a six month period there towards the latter half of 2009 that I started to create that gap and so the income slowly started coming in, the expenses slowly started coming down and I started to build up cash. When I moved to Florida, I had basically no cash. I had nothing in my name.

And right about early 2010, I looked at my checking account and I had around seven or $8,000 in it at the time which was to me a lot of money. To a lot of people it’s a lot of money and so all of a sudden I had some money to play with. If you give somebody a $1,000 and tell them to go to the mall and have fun, I was like, “Whoa, I have some money. I can start doing something with this.”

Up until that time, I started reading books like Your Money Or Your Life, I started reading about Warren Buffett and certain successful investors out there and what they did and how they went about their plan and so I started having some ideas in my head. Basically what I did was I just jumped right in.

I read quite a bit, I didn’t go into it without any knowledge at all but I opened a brokerage account in early 2010. I transferred over $5,000 from the checking account over to the brokerage account and I started investing. I started reading about companies through annual reports, going to investor relation sites and I looked at guys like Warren Buffett.

I mean you can go back to his earlier life and look at some of the investments he made and he calls them “cigar butts”, which were companies that were worth more in paper than what he was buying them for. So even if they went out of business, he would still make money and those form of arbitrage, if you will.

But the more successful portion of Warren, because 99% of Warren’s wealth was built after his 50th birthday. A lot of people don’t know that. So when you really look at the effect of compounding and really where Warren’s wealth really started to take off is when he started to invest in high quality businesses.

Businesses that have economic modes, competitive advantages, have excellent balance sheets that are able to generate increasing top line and bottom line growth year after year after year. So we’re talking about companies with brand name products or some type of advantage in their industries so I started to look at that.

I started to look around at products that people are buying every single day and no matter what’s going on with the economy, people are going to brush their teeth, they’re going to buy their shampoo and their soap, they’re going to put gas in their car, tobacco is another. That’s maybe a little bit controversial but tobacco, alcohol, products like this. People buy these products no matter what’s going on in the general economy.

So I started to look at that just from a common sense approach. You don’t need to read any investment books to really understand that and I started to invest in those businesses like Coca-Cola and Pepsi and Johnson & Johnson. Companies that produce products and provide services that are ubiquitous, that people need all around the world no matter what’s going on and I just started to get my feet wet and away it went from there.

[0:15:04] JS: Right, considering the fact that you’re just a dude working at a car dealership and you’re dealing with the most aggressively dealt with business, the financial business. What makes you think that you can figure out how to successfully invest on your own? It seems a little arrogant to me, huh?

[0:15:24] JF: Yeah, right. Well yeah, you’ve got to have some confidence. Certainly, when I started telling people about my plan — this was of course, look at my background. Not only did I grew up in Detroit but I grew up in a drug house. My dad left us when we were young, my mom ended up giving us up for legal guardianship, so it was a real rough background there.

Yeah, I was working at a car dealership. I didn’t have any background or education in finances or investing or anything else. So when I started talking to people about this, they’re like, “Yeah, right. This is a guy who doesn’t know anything about money. He racked up student loan debt, dropped out of college.”

I even had an inheritance when I was 21 and I completely blew it. So my track record with money was horrible, so people were laughing at me and I probably can’t blame them but there’s a vision there. You have to really want it, when we’re talking about financial independence, when we’re talking about saving.

Savings isn’t just something that you do for one month and you say, “Okay, yeah I saved money this month, great. Now I can go back to what I was doing.” There is a consistent approach to it. You have to be diligent with it and so by the time I started investing, there is already a six month process there where I started creating a gap.

I started to kind of focus and hone in on what I was doing. I started to become clear about what I want in life and I wanted it and you have to really want it and you have to do what’s necessary to get it and when I’m talking about “it”, I’m talking about financial independence. I’m talking about freedom, I’m talking about the ability to do whatever you want in life without regard to money, money, money, money, money.

That’s all people want to talk about. You got to start thinking in terms of time, in terms of what you really desire out of life and really what I start to figure out there, when I started to create that gap between the income and expenses once I started to drop things out and live more frugally, was that not only does money not buy happiness but living below your means actually generates happiness within itself.

It’s not just a means to an end, it’s a lifestyle. And it’s actually a lifestyle that generates a lot of happiness because of that control you have all of a sudden over your own destiny. When I talked about earlier when I was floating like a cork in the ocean, it’s depressing to think that, “What am I doing? I have no control over what’s happening. I have no control over my future,” and that’s a downer, right?

You’re totally depressed and you have all these debt and you feel like you can’t do anything about it. Once you develop this vision around what you want and that’s something that an individual has to do. I can talk all day about what I did but in the end, you have to really want it for yourself. You have to say, “I want this freedom and I’m going to do what’s necessary to get it,” and as far as the investing side of it is, like I said, these companies aren’t really difficult to understand.

You don’t need a finance degree. You don’t need prior education to understand how Coca-Cola makes money. They sell concentrates and syrups and they sell all kinds of beverages to billions of people all around the world, juices, waters, obviously their carbonated soft drinks and whatnot. And then you’ve got your Proctor & Gamble that sell detergents and soaps and toothpaste and batteries and everything else that people need.

So when you’re talking about it like that, it’s not like I’m talking about investing in merger and acquisition arbitrage or something like that. I’m talking about just basically investing in long term investments. These are companies that I don’t trade in and out of the market. I don’t need to be on it every day. I was able to go to work and work from 7:30 to six or 7:30 to seven.

And then work Saturdays and do my 50-60 hour a week routine and I was able to leave the investments just do what they do and that in itself is really a wonderful learning lesson. People think that when you invest in stock market, you’ve got to watch it every single day or you’re going to look at the stocks and watch them go up and down.

It’s just like owning a house. It’s like owning any other major asset in your life. You don’t go to Zillow.com and look at what your house value is every single day and then if it’s off 2% today, you think about selling and moving. It’s not like that. It’s the same thing with investing in businesses. These aren’t just stocks or pieces of paper that trade up and down. These are actually businesses that are selling real products to real people.

So that learning lesson was, “Hey, I can go to the dealership and make my money and earn the capital I need to continue investing and these businesses are just going to work for me. I don’t need to worry about them. I don’t need to babysit them. These are companies with millions of employees in aggregate working for me as an owner. So I can let them do what they do, I can let them sell products and sell services and I can do my own thing and I can continue to make money.”

[0:19:52] JS: That’s a great answer. I was trying to bait you a little bit but you brought out such an important point. If you don’t have a burning desire to do something, you’re not going to be able to figure out how to build the belief in your ability. But if you have a clear desire, then you can figure it out and maybe there’ll be some starts and stops and some fumbles and some stutters. But if you can develop a vision about what you’re trying to accomplish, you’ll figure out a way to get there.

And the background doesn’t matter. The key is that all of us can learn our way out of any problem that we face. We really can and whether it’s learning how to simply deal with the problem or whether it’s learning how to fix the problem such that it no longer exists, we can learn our way through it if we have a clear vision.

[0:20:43] JS: Your whole side is about dividends and so as I understand it, your strategy is to purchase dividend paying companies and focus on that and focus on the amount of dividends that they’re paying you as a major metric for your success.

[0:20:59] JS: Did you — your whole side is about dividends. And as I understand it, your strategy is to purchase dividend paying companies and focus on the amount of dividends that they’re paying you as a major metric for your success. Did you go through a process of considering various investment alternatives and then this is what you’ve landed on? Share with me that learning process.

[0:21:10] JF: Yeah. So that dates back about five or so years ago, that was late 2009 early 2010 and I was reading a number of books. The first book I read was Your Money Or Your Life. First of all, that’s a fantastic book. I recommend it to anybody who is just starting out and they’ve got the gears working in their head but the light bulb hasn’t quite lit up quite yet.

So that’s a great book and that formed the framework, if you will, of trying to get out of debt and become financial independent. As far as investing specifically in dividends, yes, I started to read books. The first strategy that I looked into is index investing. So just putting away capital every single month and putting it into an S&P 500 fund or a total market fund.

Then maybe diversifying that with a bond fund or a real estate fund or what have you, two or three funds and then you just set it and forget it kind of thing. And I looked into that and that seemed like a very viable strategy and in fact, if I wasn’t doing what I am doing, if I weren’t doing this then I would definitely just index invest. That’s all I would do.

I would maybe open an S&P 500 fund, maybe a bond fund when interest rates arise and that’s it. It’s very simple, it’s very easy and anybody can do that and low fees. You also collect a little bit of income via the yield that this funds yield but the problem with that strategy for me and what eventually led me to dividend growth investing is that the income that index funds provide are typically very low.

The S&P 500 yield is like around 1.8% right now. So if you’re looking to live slowly off of the income your portfolio generates, 1.8% that’s going to require a pretty substantial capital base in which to just live off that income. So at that point, you’re either doing one or two things. You’re either working for a very long time to build up the capital necessary, the principle necessary to withdraw such a low yield. Or B — what was my point there?

[0:23:16] JF: Or B, you’re withdrawing some of the principal balance, excuse me. So which leads me to the 4% safe withdrawal rule. There was a study done a while ago called The Trinity Study. It’s since been updated where basically what they recommend is withdrawing no more than 4% to create a sustainable withdrawal rate over the course of a 30 year retirement.

And I wrote an article on that not long ago. The problem with the 4% withdrawal rate, which is assuming again, you’re withdrawing basically the gap between the yield of the index and the 4% which would be what? About 2.2% right now. The problem with that is that there is a failure rate in there. People think that you can just withdraw 4% adjust for inflation for the rest of your life and forget it but there are failures in that model.

So you have to ask yourself, “Am I okay with the slight percentage of failure? Am I okay with a three or five or 10 or 20% failure rate depending on how aggressive I am and what percentage I have on stocks and bonds?” So I kind of asked myself that question especially when I am talking about retiring by 40, that’s my whole goal in life is to retire by 40 years old or to become financially independent by 40 years old.

In the Trinity Study when they talk about the 4% withdrawal rate, it was done over a 30 year period. So that puts me about seven years old. I hope to live longer that. I don’t know, I’m not guaranteed anything but I hope to live longer than that and so when you start modelling that out even further, the numbers become even more unclear.

So I ask myself, “Am I okay with any type of failure at all?” And I wasn’t. So that eventually led me to dividend investing through a number of different ways. But again, talking back to Warren Buffett, when I started looking at Warren Buffett and what he started doing as he got older and once he start to really generate some serious wealth for himself and Berkshire Hathaway, was he started investing in companies that are high quality companies.

And what I happen to find was, this isn’t always true, but when you look at the majority of high quality companies, Fortune 500 companies or basically the top 40 or 50 companies in the world and again, I am talking about companies that are worth $100, two, three, $400 billion, almost all of them pay dividends and they typically increase your dividend year after year after year to shareholders because shareholders are the owners of the company.

These are publicly traded companies, so as shareholders, we cumulatively own the company so I start to look at that and I started to say, “Wow, these companies all pay dividends,” and I started to look at the yields of these companies and these yields were far in excess of what these index funds offered. So we’re talking about yields of two and a half, three, 4.5%.

So I start to look at that and say, “Wow, if I’m getting three or 4% in dividends on my portfolio, that means that A, I’ll need a lot and less capital in order to live off my portfolio because we just doubled the yield of the portfolio and B, I won’t have to work nearly as long and C, the principle itself that the underlying equity in these companies, I don’t need to withdraw. I can just let that continue to grow and grow and grow.”

So if I want a 100 or 200 or 300 shares of Johnson & Johnson, I can just live off the dividends that Johnson & Johnson provides me as an owner and let those two, three, 400 shares grow and grow and grow overtime and let the dividend income organically grow by itself. I don’t need to sell shares in order to live. And that’s the “eureka moment” for me. That’s what happened. I started to look at that and say, “Wow, index investing seems great.”

You’re basically going to get market rate returns minus the very tiny fees that the index funds charge you but you’re basically getting the market. The income that they can organically generate for you via just the yield, frankly is not enough for most people so you’re going to have to sell off assets and whether you are comfortable with slowly withdrawing your assets overtime and introducing even a very small percentage or even a small failure rate in there it’s just something you have to ask yourself if you’re comfortable with.

So that’s what really led me to dividend growth investing. I start to look at the organic income that my portfolio can provide or generate and if I can live solely off that — what I look at it as or what I compare it to is a tree. My portfolio is a tree and each branch off that tree is a stock, is a position as a company I’m invested in right? And my portfolio right now has 51 branches or has 51 companies I’m invested in.

So we’re talking about Coca-Cola, Johnson & Johnson, Procter & Gamble, Exon Mobile, Unilever, all these businesses, right? And every branch produces fruit. Every quarter or month or semi-annually or annually depending on the dividend schedule of these companies and all I do is I pluck the fruit. And then that branch grows more fruit the next quarter, the next six months or whatever.

Now right now what I’m doing is I’m taking that fruit and growing more branches with it. I’m reinvesting that dividend income and growing the tree and growing the branches. But eventually, I’m going to just pluck that fruit and live off of it. That’s what’s going to sustain my life. Now the other strategy, index investing, you’re cutting off little portions of that branch, those branches off the tree and what you’re hoping is that that the branches grow faster than you can cut them down.

Whether or not they do that, I don’t know? When the trend started to came out, it used to last, you know, the historical stock market is a proxy for the future. Whether or not the future acts anything like the past, I don’t know? Again, even using the past there were some failure rates in there and we don’t know what’s going to happen over the next 50 or 60 years but I do know that the odds are very good that Coca-Cola is going to continue to sell beverages all around the world. People have to drink something to sustain life.

You can argue that water out of your tap is free, but water has been free for a long time now. People continue to buy Powerade or orange juice and Coke and everything else that they sell. So the odds are good that these companies are continuing to grow and sell more products and sell more services overtime and with that, their dividends are also going to continue to grow.

So that’s what’s happening and speaking of growing dividends, the fruit I was talking about, not only do I pluck it off the branches but the dividend income, the fruit actually grows overtime. Like Johnson & Johnson for instance, they’ve been growing their dividends for over 50 years. So for the last five decades, that fruit got bigger and bigger and bigger. So it started out as maybe a grape, and is now a grape fruit. So that stuff grows all by itself. So the inflation protection is built right in.

With the Trinity study with the 4% rule, something important to note is that, when the time of withdrawing 4% of your portfolio, they’re also adjusting it for inflation. So you have to manually withdraw or cut down those branches more and more and more every year just to keep up with inflation because everything gets more expensive overtime due to the fee out currency and everything else. So you’re cutting off just a little more of that branch every single year and you’re hoping that branch just grows a little bit more to make up for that.

Again, whether or not that happens, I don’t know but I do know these companies grow their dividends year after year after year and your inflation protection is built right in because many of the companies that I invest in and that I discuss on the site, typically grow their dividends well and excess of inflation. You are typically on the rates of seven to 10% a year whereas inflation is averaged around 3% or so over the long term.

[0:30:19] JS: One of the things, one of the most powerful aspects I think of dividend investing is that I think it adjusts your thinking from the thinking of a trader to the thinking of an owner and there’s something powerful about receiving income and just simply having your income without spending your principle and there are objections to this, which we’ll go to after a little bit but it’s powerful to actually gain money off of it.

In my own personal portfolio, I realized this a few years ago that I had always been diligently investing but I had always been investing in retirement accounts because that was what I was taught to do, put the money in retirement accounts and I realized, I’ve never experienced the joy of going out and spending money from an investment.

[0:31:07] JS: Here I am, I’m 29 years old and I’ve been investing since I was 18 and in 11 years, up until I made this change, so this was a few years ago. Basically in almost a decade, I have never experienced the joy of getting a check from my investments and going and buying something with it because all the money was locked in a retirement account.

So I actually recognized I need that emotional connection to my money because that quarterly statement comes in and it shows how much the dividends were but I can’t spend it. So I went and I changed some shares of a mutual fund that I owned outside of a retirement account and I switched the dividends from automatic reinvestment into coming into my checking account.

Then when the money came in, I purposely went out and spent it so that I could enjoy the benefit if actually — this is the whole point of investing. It’s to have income that we can spend but we never. All the money is locked away in some stupid 401(k) so we invest, invest, invest, invest and the only connection we have with our investments is the number that’s printed on the bottom of the brokerage statement every quarter.

Then that just completely destroys most of us, our ability to emotionally be stable with regard to market fluctuations whereas if you’re just focusing on that quarterly dividend check, whether or not Johnson & Johnson’s share price increases or decreases by 10 or 15% per quarter in one random quarter, that’s not going to dramatically affect the dividend that they send out.

[0:32:42] JF: Yeah, absolutely. Absolutely and what I was talking about there is more on the macro level of looking at investing but right. I have talked a lot about dividends themselves are very tangible. That’s actual cash money you can touch and I invest all my income in taxable portfolio so I don’t have a 401(k), I don’t have an IRA or anything like that. It’s all in a taxable account.

[0:33:10] JF: Well, a number of reasons. When I was still working in the auto industry, I’ve recently moved from working in the auto industry to writing full time. That was a move that I made very recently but when I was still working in the auto industry, the 401(k) that my employer offered didn’t offer a match.

The funds that they offered were really horrible. They were really high end fees. I didn’t have access to a Vanguard, S&P 500 fund with a 0.05% annual fee or anything like that. These were typically funds with half a percent fees or percent fees on and I didn’t get a match on top of it and another thing is I’m looking to retire and live off my dividend income very early in life.

So my situation isn’t necessarily applicable to everybody else out there or even many people at all. I’m trying to live off my dividend income by 40 years old so to invest a substantial portion of my assets in a 401(k) that won’t be really be able to access until 59 and a half years old really won’t cut it for me.

So I need all my capital, I need all my fire power going into the taxable accounts that I can withdraw early in life and another point on dividends is that, they’re tax efficient. There’s unqualified dividends which are the substantial portion of the companies that I invest in. Any company that pays qualified dividends, you pay zero percent taxes on those up until the point where you cross over the 25% marginal income tax bracket.

So if you’re making $30,000 a year in dividend income and if that dividend income is qualified, you pay zero percent taxes on that. So you are basically walking around with $30,000 tax-free which if you compare that to W-2 income would be substantially more than that after you factor out social security and FICA and Medicare, you factor out your federal income tax and everything else and again, Florida, you have no state income tax at all. So basically it’s just zero percent.

Now, there are certain investments like real estate investment trust and things like that that don’t pay qualified dividends that you do pay taxes on but I keep that around 5% or so in my portfolio. So it’s a very small number if you’re looking at it from the total number. $30,000 if you’re paying 3 or $400 a year in taxes, it’s just peanuts. So that’s why I do what I do but getting back to your point about dividends and sales, they are very tangible.

And one thing I really like about the strategy is that I’m able to actually see financial independence come in like a ship. I can actually see it come to shore. I can look at my dividend come month after month after month and I see it growing and growing and growing and growing. And I can see that. If you’re looking at it like on a chart like Your Money or Your Life would recommend what they call wall chart and they recommend you plot your passive income down at the bottom.

You start out at zero then it’s $20, then $50 a month and it grows and grows and grows and you can see that number start to rise against your expenses and eventually, when the passive income exceeds your expenses, that’s what they call the cross over point or when you can actually start living off your passive income but that’s one thing I really love about dividends.

It’s tangible, it’s cash money. It’s real income that’s hitting my account every single month and my account’s taxable. So if I want, I’m earning around almost $500 a month in dividend income right now so if I want, I can actually start withdrawing that cash and use it for whatever I want. It’s real money that comes in my way that I can do whatever I want with.

So it’s just like income I earned from anything else in life be it a job or be it a hobby or be it selling something on Craig’s List or whatever. So that’s real cash that’s coming my way and like I said, right now I’m reinvesting that and growing the portfolio but eventually, it’s just money coming my way. So people look at dividends for some reason as, “Oh, so you’ll be looking at your return of investment? And blah, blah, blah.”

Sure, that’s all fine and dandy but a separate point is that it’s real cash. You don’t need to sell anything. You don’t need to do anything and now that, it bypasses the stock market. Like I said earlier, people like to look at the stock market and like to look at the ups and downs of it and say, “Oh no it’s down. Oh yes, it’s up.” But the dividend income stays very steady and it’s typically slowly up and up and up and it’s tangible money whereas the stock charts aren’t really tangible. It’s just numbers floating out there in the world.

The dividend income is real money and like I said, it comes directly from the companies. Stock prices go up and down. Companies don’t really have a lot to do with stock prices. Coca-Cola has very little control over their stock price. That has to do with supply and demand of their stock and traders and all these computers that are set up to do trading in micro seconds but Coca-Cola the company has control over their fundamentals, over their sales, over their earnings, over their balance sheet and they also have control over how much dividend income they pay the owners.

So the dividends bypass the stock market. You really don’t have to look at the ups and downs of the stock market because it’s cash money coming directly from Coca-Cola to shareholders. And one other thing I love about dividends, I think like an owner. When I own equity in a company, I look at myself like an owner because as a shareholder, that’s exactly what you are.

Stocks aren’t just pieces of paper to just trade around. You’re actually owning equity in a real company selling real products and services. So I look at it like I would own my own business and I often compare it to a pizza shop. So if I own Papa Jason’s Pizza Shop and I have these employees working for me and creating wealth for me, do I not want to get paid?

Would I not want to collect a check from that business? Would I not want to collect income so I can live off of it? I would right? I mean anybody would. If you own your own business, you want to collect a check. You don’t want to work for free. So that’s the dividend income. That’s Coca-Cola saying, “Hey, you’re an owner of this company. This is your cut of the profits.”

Just like anybody who would own a private business in their own, they would obviously want a cut of their profits and that’s where dividends would come in. So people who invest in stocks that don’t pay dividends and say they’re better, maybe you feel that way and maybe not, whatever. But that’s real income coming your way and that’s your right as an owner of a business.

That’s your right to collect that check and that’s where the dividends come in. It’s your paycheck so yeah, dividends are very tangible. That’s one thing I love about them and I am able to actually, I report on my dividend income every single month and I report on my income and expenses every single month.

The dividend income is slowly increased to the point now where it’s covering about a third of my expenses now. So I can actually say with confidence I’m about 33% financially independent right now. So I’m about a third of the way there because I can actually see that cash money coming in and that’s real cash against real expenses.

[0:39:41] JS: And so you’ve done that in, when did you move to Florida? Is it 2009 so five years?

[0:39:46] JF: Yeah. I started investing in March of 2010. So it’s been a little over four years now.

[0:39:51] JS: So that’s amazing man. To go from, you said you’ve never made more than $70 working at the car dealership and then to go from a zero net worth to a $200,000 plus net worth and to be a third of the way towards your expenses, that’s fantastic. You’re doing awesome.

[0:40:06] JF: Yeah and that’s really to the point of it all. Is that I’m nobody special. I didn’t have any training. I don’t have any inside connections. I didn’t grow up with somebody that taught me these things. When I went to college, I originally studied secondary education and my very last semester in college, I didn’t really know what I want about in life.

Like a lot of people that go into college at 18 years old, you don’t know what you want. So I was switching majors a lot. My very last semester, I studied accounting and it seemed interesting to me. I looked at the numbers, I started looking at balance sheets and income statements and that stuff all seemed very interesting to me but I didn’t really apply it until a number of years later.

But other than that, other than a quick course in accounting in college, I don’t have any training in this and so if I can do it. So if I can work at a car dealership and work in the service department and write up repair orders and tell people what their car needs for repairs, which couldn’t be further away from investing and stocks and the stock market, then anybody can do it.

All you need is just the desire and you need, obviously, a little bit of capital and with the abundance here in first world countries like the United States, there’s absolutely no reason why people shouldn’t be able to save at least 20 or 30 or 40% of their net income. I mean even if you don’t make pretty much money, if we’re being honest, it’s just downright silly what we spend money on and how much money we spend.

If you look at it on a global scale, if you were to look at the global GDP and what the average person globally makes and spends, we’re almost getting silly at this point. A lot of stuff is practically free really when you think about it. So yeah, it’s very easy to create kind of that gap or that spread between income and expenses as much level but a capital and you have the desire to do it.

Regardless of what strategy you use, if you want to use an index investing strategy, then that’s fine. But the key is to have the desire and the consistency and the persistence and the patience and everything else that’s necessary. You’ve got to work hard, you’ve got to have a little bit of luck. They say success is where hard work and luck intersect and that’s very true but you’ve got to work hard at it and that’s what I did.

For years and years, and years, and years, and years I clocked in at 7:30. I didn’t leave until six or 7 o’clock at night. I work Saturdays and then on top of it, I also started my blog and wrote about all these stuff for years on end. So I was basically getting up at around 6:30 and I was working until almost 10-10:30 at night. It wasn’t this all magically happened for me.

It was an incredible amount of hard work that I had to put in to do it, but the rewards are obviously extremely worth it because if I’m able to at 40 years old, go from being worth less than a baby at 27 and at 40 be able to live completely off the dividend income my portfolio generates for myself, then that’s pretty substantial and something to be proud of. But it really speaks well to the point that if I can do it then anybody can do it. If I can do this with my background, then there’s no reason why anybody else can’t do it.

[0:42:53] JS: Do you automatically reinvest dividends into the companies or do you have them all funnelled into a central account?

[0:43:00] JF: Right, so I don’t — they call that “dripping”. Dividend Reinvestment Program where you automatically reinvest the dividends back into the stocks that paid them. I don’t do that. I let the dividends just accumulate in the portfolio and then I reinvest them manually and that’s because like I said earlier, I look at dividends just like income from anything else.

The dividend income that hits my portfolio, it doesn’t matter which company paid it to me. The dollar amount if what matters and the capital, the power of that capital, the ability for me to compound that capital is really what I look at. So if Coca-Cola paid me a dividend and Coca-Cola stock just really isn’t attractive right now on a valuation basis.

If I feel like, “You know I think I can get a better deal in the market than Coca-Cola stock right now” or let’s say like Johnson & Johnson, that’s my biggest position by dollar weight. I have about $10,300 or $400 invested in Johnson & Johnson and maybe I don’t know if I want to have more invested in Johnson & Johnson?

That’s a pretty big position for me, maybe I wanted to start to diversify a little bit and to round out some other positions around Johnson & Johnson. So there’s a number of reasons to do it and not to do it but I look at it just as capital. So I don’t think you need to just automatically reinvest dividends with the company that paid them.

The businesses are paying you as an owner. It would be like my pizza shop. If I’m able to generate income from Papa Jason’s Pizza Shop, does that mean I automatically need to invest every single dollar back into the pizza shop? No. I can take that money and invest it to a new business or invest it to a rental property or do whatever I want with it.

It’s simply capital that provides you more fire power, more money to do what you’re already doing. So people can say reinvestment and that’s an easier way to do it. My way certainly takes a little more time but I’m investing every single month anyway. I am funnelling thousands of dollars to my brokerage account regardless of what dividends got paid to me.

So I am simply tacking on that dividend onto what’s already being funnelled in. You can look at it like I’ve already got a ship going out to sea and I’m just adding a couple extra passengers is all I’m doing so they are stowaways I guess but that’s how I look at it. I look at it as a capital. I don’t need to reinvest it back into the business that paid it. I can reinvest it, I can deploy it however I want.

[0:45:11] JS: I like the benefits of that. It’s actually a disagreement that my wife and I have with each other, but I like the idea of having all income from all sources no matter what going into one central account and then all of the money in that account, going to whatever the financial priorities are at any one specific time.

We have this psychological, I’ll call it a problem, my wife would say it’s not but I’ll call it a problem. We have this psychological problem of viewing different sources of income as different so for example, if somebody gives us a $100 as a gift, then we say, “Well, that $100 I’m supposed to go and spend it because it was free money.”

But the reality is, that $100 should be simply going to whatever the next financial goal is on the list. So if you’re next financial goal was to go and buy a new lens for your camera, then you should go spend the $100 on that but if the next financial goal was to pay that $100 toward your credit card debt or you’re looking at shares of Johnson & Johnson.

You’re saying, “Hey, I think this are attractively priced right now,” then that $100 should go towards that. And we really, I think, have a psychological problem of viewing money differently depending on the source but the reality is that the entire goal of investing is to create cash flow. That is the goal because cash flow is what funds life and so every dollar should be treated the same in my opinion.

Again, whether it’s gift income, whether it’s earned income from a wage job whether it’s business profits from a side business, whether it’s — no matter what. Because then, we can accurately assess all of the opportunities that we have and by just simply saying, “Hey, I’m choosing to purchase shares of Coca-Cola,” is that a more attractive business for me to own?

Or is it more attractive for me to open a Subway franchise in my local shopping plaza? That should be the decision criteria. So I feel I made this mistake earlier I think because I always use to view them as differently and then I recognize, “This is a problem,” and I’ve tried to ignore the source of income and just focus on all the income going to one spot and then what’s the next financial priority in my life?

[0:47:29] JF: Exactly, yeah. Cash flow is cash flow. I look at cash, I’m cash-agnostic you know what I mean? I don’t care if my aunt gave me a $100 or if Coca-Cola sent me $100 or if I earned $100 from my job. A $100 is a $100 is a $100, it’s just cash money, it’s cash flow and that cash flow can be used to grow. Your cash flow can be used to reinvest or what have you to grow that cash flow.

What you want to do is you want to grow it in the best manner possible or in the greatest opportunity available to you at that time. Not all opportunities are the same and the stock markets, there’s thousands of stocks out there in the stock market and not all opportunities are created equal at any given time.

So every single opportunity that I have from my cash flow competes with every other opportunity available at that time. So Coca-Cola just because Coca-Cola paid me a dividend doesn’t mean I need to reinvest it back to Coca-Cola because Coca-Cola is competing for my capital. I look at it like I’m forming a basketball squad, right? And Coca-Cola is one of the players I can draft. “Hey Coca-Cola, I love you in my portfolio right now but you’re slumping in the last four or five games. I’m going ahead to draft this guy for this game.”

So every opportunity competes with every other opportunity and there’s thousands of opportunity out there. In dividend growth stocks alone, there’s around 550 stocks that have increased their dividends over the last five consecutive years out of all the US listed stocks out there. So you are talking about 550 stocks right there.

So to think that you need to automatically reinvest every dividend with every company that paid, to me is a great way to do it and it’s very simple and very easy and everything. It closes the book right there but really, if you’re talking about opportunities, you’re talking about creating more wealth and increasing your cash flow at a more advantageous rate, then you want to make sure that you’re deploying that cash flow in the best opportunities available to you at that time.

[0:49:23] JS: …with security. How do you approach your analysis from the perspective of valuation? What have you learned and how do you approach a new investment decision?

[0:49:33] JF: Well, right. So valuing stocks and valuing businesses and everything, that’s something that’s pretty subjective but how I do it and I’ve grown as an investor, I’ve learned a lot over the years. When I first started, I didn’t know nearly as much as I know now but where I’m at in this particular time, what I do is I start by looking at annual reports. I start by compiling numbers.

What I do is I tend to do is I look at 10 years of numbers. I look at 10 years of revenue, 10 years of net income, 10 years of earnings per share, 10 years of dividends and I look at growth rates. I look at what a company is able to do over a 10 year period and I generally try to use that as a proxy for the long term.

So what I start doing is I start looking at compound annual growth rates and I try to look for company’s that are growing earnings at least in the high single digits, if not somewhere in the double digits. But seven or 8% a year is pretty solid because if the company is able to grow by seven to 8% a year then the odds are also good that it is able to grow its dividend by seven or 8% a year.

You combine that in with a two or 3% yield and you’re looking at a pretty attractive total returns. So I start by looking at the annual parts. I start by compiling numbers. I also look at items, when we’re talking about fundamental or quantitative analysis, these are just pure numbers. I look at return on equity, I look at margin, I look at return on invest of capital, I also look at the balance sheet, I like to invest in companies that are conservative in terms of how they manage their money.

Just like you wouldn’t want to maybe date somebody who’s a $100,000 in debt, you might not want to invest in a company that’s deeply in debt either. Because every dollar that they’re paying in interest is one less dollar they can pay to you as an owner in that business. So I like to invest in companies that are relatively conservative on the balance sheets. I look at debt to equity, I look at interest coverage ratios, how much of their earnings are going towards interest expenses or whatnot.

And then I also like to look at the qualitative analysis which is really just as important. People look at the numbers and then that’s it. I see a lot of people that make that mistake especially young investors. They look at just the number and say, “Oh this company grew by 7% a year over the last 10 years. Boom, I’m investing.” But again, you have to think, “Okay, this is what happened over the last 10 years.” But we’re not investing in what was. We’re investing in what’s going to be.

Like Wayne Gretzky would say, “You want to escape to where the puck’s going not to where it is.” So I look at the qualitative side. I look at what competitive advantages the company has. What are the odds that this company will be able to grow at that continued rate? What are the recent analysis reports on the company? What are some of the recent investor presentations all about? Are new products coming out? Is the company continuing to invest in the business, to research and development? Are there barriers to entry in terms of its market?

Like a railroad circuit example, all the railroads that are built in this country are all that’s ever going to be built. You can’t just form a new railroad and get right of passage or right of way across the United States. So Norfolk, Southern and Union Pacific and CSX and these railroads, there’s huge competitive advantages there because that’s it. The competition that’s in place is already in play. So it’s like Monopoly. You own three or four railroads and you’re locked in.

I look at competitive advantages like that. Do they have brand name products? Are they generally able to grow prices in excess or at least in line with input cost rises? You look at inflation, is this company be able to grow over the rate of inflation? I do a qualitative analysis and that’s also extremely subjective because I may think, a company has more competitive advantages than you may think they have and that’s where investing differs and that’s kind of the fun and that’s what makes the market. For every buyer, there’s a seller.

But that’s how I do it. I look at annual reports, I look at what is the company doing, do they take investors seriously? You’ll notice a lot of different language in annual reports and the annual reports are basically a gateway or I look at it just like a view into the thought process behind the company. So when they started using words like shareholders and business owners and returning capital to owners and long term.

When they start using words like that, that’s what gets me hyped up and I get pretty jazzed up when I start reading stuff like that. When you start reading stuff about what happened this year, what happened last year and problems and excuses and things like that, it’s the weather, when you start reading stuff like that, sometimes that can be bad news.

But that’s where I take it, I look at the numbers and I also look at the qualitative side and actually, speaking of dating, I compared analyzing companies to analyzing or looking at potential partner, a life partner, and that they’re very similar. Just like you would look at dating someone, you might look at how much income they make.

You hate to be superficial about it but that’s something that certainly goes into the thought process of whether you want to date somebody or marry somebody. Some may look at how much debt they have and how much money they make and are they able to cover half of the bills, are they responsible with the money? Did you meet them and they have $200,000 in debt due to credit card bills and they have a bunch of excuses to why they got to that point? So you look at the fundamental side of their life.

But you also, just as importantly, look at the qualitative side of their personalities. Are they honest? Are they kind, are they loving? Are they generous? So that’s how I look at companies. I look at companies on the numbers side and fundamental side and look at them at the qualitative side as well and they go hand in hand. Generally, companies that are fundamentally excellent tend to also be qualitatively excellent and vice versa but that’s where I look at it.

[0:54:57] JS: Do you track your returns on your portfolio and do you compare them to a benchmark?

[0:55:03] JF: I used to. The last time I compared my portfolio to the S&P 500 was back in I think early — gosh? Early 2013 or late 2012, it was quite a while ago and a couple of reasons why I stopped doing that and I wrote a lengthy post a while back and why I don’t compare myself to S&P 500. But first of all, I was beating the S&P 500 by a very slim margin which is really unimportant and doesn’t matter at all to my long term goals.

The reason why I don’t compare my portfolio to the S&P 500 is because it’s just noise to me. It’s just a way to distract me from what I’m really after. Again, as I stated earlier the dividend income rising against my expenses, the ability for my portfolio to generate cash flow and the ability for me to compound my income into future growing cash flow is what really will determine my ability to retire by 40 and live off my dividend income.

My ability to beat a benchmark, a really arbitrary benchmark like the S&P 500 index is really unimportant and does matter all to my goals. For instance, let’s say I compared myself to the S&P 500 index and over the last couple of years I was beating it. But let’s say this year I don’t beat it. Let’s say this year I trail up by two or 3% and next year, I trail up by 2%. Do I then abandon everything I’ve been doing for the last five or six years?

So somebody might look at my portfolio and say, “Oh man, well the dividend income you’re generating you’re right on pace. You’re 33% there, you’re about a third of the way in your journey at 32 years old, you’ve got eight years left and you’re going to be there man. I mean st 40, you should be able to generate enough dividend income to live off of it.

But hold up, wait, wait, I see that you’re trailing the S&P 500 index by 2% this year. Woah, woah, woah, woah, woah. You’ve got to abandon everything! You’re not on track now. You won’t be able to live off your cash flow. You’ve got to invest in the S&P 500 index or you’ve got to change everything here.” So doing that, allowing yourself to compare yourself is, in my opinion, just a bad idea.

Comparing yourself to the S&P 500 index, the S&P 500 index is just the 500 largest companies in the United States. What that makes it anymore of an appropriate benchmark than let’s say the Vanguard dividend appreciation index or the Vanguard Wellington index or the Dow Jones or the Nasdaq or any other index out there?

We just arbitrarily chose what we want to compare ourselves to and the S&P 500 index is a well-known belt-weather for the overall stock market. I get that. I’m not ignorant but at the same time, comparing yourself to the S&P 500 index to me would be just the same as comparing yourself to somebody else or to another investor.

“Oh Well, I didn’t quite return what he returned so I need to abandon everything I’m doing and now I need to change everything.” As long as you have goals set up that are realistic and that are time based and everything else and that are appropriate for your income level and your means and what you’re really looking to get out of life and as long as your plan works for those goals, for your independent goals, that’s what matters.

Comparing yourself to others or comparing yourself to benchmarks, to me that just gets in the way of what you’re really trying to do so I don’t compare myself. I do find that my portfolio tends to somewhat lag on days when the stock market goes up by quite a bit and I tend to find that it also does better when the stock market goes down by quite a bit.

That’s because many of the stocks that I invest in have low what they called betas. They have low beta. Beta is a measure of volatility so if the stock market has one, many of the companies I invest in have betas of anywhere from 0.4 to 0.8. So they fluctuate less in the overall market.

When it’s up more, they go up by less. When the stock market goes way down, they go down by less. So really what that does is that it creates a smoother result. So if the stock market is up by 1% today, my portfolio would only be up by 0.7% but if it’s down by a percent, it might only be down by 0.7%. It creates a smoother result which some investors may like that.

Again, I don’t really compare myself to that, to compare yourself to a benchmark and then think you need to abandon everything you’ve been doing even though you might be completely on track for what you’re after in life would be a huge mistake in my view.

[0:59:18] JS: Do you invest through a brokerage account or directly with the company through their investor relations department?

[0:59:24] JF: I use a brokerage account. I personally use Scottrade right now. When I first started investing back in early 2010, it wasn’t an attractive choice. There’s some cheaper brokerages that came out in the last few years but Scottrade is well capitalized. They’ve been around for a long, long time. They are covered by the SIPC and everything else. So I invest with the Scottrade.

The offer is $7 commission trades which is pretty attractive if you compare that to 10 or 20 years ago, you are paying quite a bit more to invest in stocks. I don’t invest directly through companies like some type of computer share or something else. I invest in a brokerage. It’s a safe and easy way to do it. It’s convenient. I can access all my investments in one central spot and I can do what I want with it from there.

[1:00:13] JS: There’s an argument in the dividend growth investing world about whether or not a company or I guess just a larger investment world about whether or not a company should should pay dividends or rather the company should be responsible for investing those profits.

In essence, there are many permutations in the argument but some company leaders, I guess probably the most famous ones would have been Steve Jobs with Apple and then also Warren Buffett but for different reasons. Steve Jobs would often make the claim, in my memory that, “If I can’t invest the money better than you can, then why on earth am I running this company?”

Like if you just sell shares but I’m not going to send you the money when I’ve got all these incredible investment opportunities and that’s always made a lot of sense to me. Why would I bother to hire somebody to — the reason I’m investing in a company is because I want them to identify the market opportunities.

Now, when they send me the dividend now I have to take and go and figure out where am I going to allocate that money and find someone else. Why would that person not just simply focus on, “Here is the best use of the investment.” And then the second example, so it was also Steve Jobs always argued, which is why prior to his death to my knowledge, I don’t think Apple ever paid a dividend and didn’t they start recently? Didn’t they paid a dividend finally?

[1:01:36] JS: Right, okay and the Berkshire Hathaway, Warren Buffett would talk about that from a similar perspective and then also he would talk about it from the perspective of tax efficiency model and there is some major tax drawbacks from the company’s perspective that the managers will often choose not to pay dividends or to reduce dividends or to return value to the owner in some other way. So whether that’s through a stock buyback increasing the shares, whether that’s through other mechanisms. So I’d like you to comment on those two issues please.

[1:02:10] JF: Sure, right. So again, dividends everything in life has upside and downside, benefits and drawbacks and certainly, those are some of the drawbacks of dividends specifically the tax point because the corporation has to pay taxes at the corporate level before sending you the dividends. So there is a slight drag there in terms of return.

But a couple of points, specifically to Steve Jobs and Warren Buffett interestingly enough. When you talk about returning value to shareholders and when we talk about companies like Coca-Cola, Coca-Cola doesn’t return all their retained earnings because part of the retained earnings are what they keep but they don’t return all the cash flow to shareholders in terms of dividends.

Part of that cash is used for dividends. They pay out around 50, 60%. I don’t know the number off the top of head but around 50 or 60% of their earnings in the form of a cash dividend to shareholders. The other cash is used for a variety of other reasons. They’re still investing in the business. Just because a company pays a dividend it doesn’t mean they’re not still growing. It doesn’t mean they’re not still trying to actively grow the business.

Coca-Cola for instance recently invested in Green Mountain Coffee Roasters. They also recently invested in Monster Energy by buying equity stakes and forming joint ventures so they’re still growing the business. The dividend is basically just the company saying, “Hey, we just are drowning in cash here. We have way too much money and the growth opportunities that we see in our particular market are somewhat limited to the amount relative to the cash we have. So therefore, we’re going to give you guys some of these so we don’t waste it and we’re going to keep the rest that we know we’re going to continue to grow the company with.”

And share buybacks are another way for companies to return cash flow and return value to shareholders. The number of the companies that I invest in almost all of them do share buybacks, Johnson & Johnson, IBM for instance is one of the larger examples of that, Coca-Cola, they all return a ton of value to shareholders in the form of share buybacks. So it’s a combination of them. You can argue one is better than the other.

I like my cash, like I said earlier. Now going back to my earlier example with the pizza shop. If I own Papa Jason’s Pizza Shop and I retained all the earnings and let’s say 10 investors came into Papa Jason’s and said, “Hey Jason, we want to invest in your company. Here is cash for equity and we want a return on our investment in the form of a cash dividend. We want money back,” because you could say the company is doing great but cash tells me what I need to know.

Cash is a proof in the pudding. Cash says, “Hey, you are making money and this is the cash to prove it,” right? So overtime, I can continue to grow and grow and grow Papa Jason’s but at some point, there’ll just be too many Papa Jason’s to the point where I just can’t continue to grow the company in an attractive rate for these investors and I’ll have to return cash back to them.

It’s the same thing with Coca-Cola. People will often stop by and say, “Well, if I was Coca-Cola, I’d just stop paying dividend outright and just grow the company.” To me, that is just saying management is poor. Management is saying, “Hey, you know we can’t grow this company anymore,” and of course, those argument again are ignoring the fact that Coca-Cola is still growing the business. They’re still using that capital for investing, they’re still buying back shares.

But my response with people will be, “Okay, well let me sit you in the chairman’s seat and where do you go with that money then?” If dividends are such a bad idea, then what is the alternative? Where does Coca-Cola go with this money? The dividends are basically, in my view, a way for management to stay prudent with capital. The less capital Coca-Cola’s management has, the more useful or the better they can use that available capital and get a good rate of return on it.

So when you’re talking about return on equity, if you increase the equity side of the equation there is a question there as to whether they can get a solid return on that to compensate for the increased return in the form of the additional retained earnings are taking on because they are not paying a dividend anymore and where do they go with that money? Where do they go with that capital?

Johnson & Johnson is a good example. We are talking about a company that’s worth two or $300 billion. The opportunities for growth are just somewhat limited. These companies are taking in revenue that are competing with countries. Their revenue is on par with countries out there in the world. So where do they grow? What attractive measures do they have? Other than just acquiring other companies outright and just growing and growing and growing, there’s limits to attractive growth there.

And so the dividends is basically saying, “Hey shareholders, we have enough money already over here. We’re just drowning in cash. Here is a paycheck for you. You own this company and we’re saying that we can grow the remaining amount of capital with an attractive rate but if we were to have all this capital, we wouldn’t be able to grow it in an attractive rate.” And Apple is a good example of that. While Steve Jobs was still alive, Apple was growing substantially.

They were a much smaller company than they are today. They’re like a $600 billion company now. They weren’t that way 10, 15 years ago. They grew at just an exponential rate and certainly, you can make an argument too as to why Steve Jobs is so famous in the first place because he was an excellent manager and a visionary. Not every company has a Steve Jobs helming the ship.

So Steve Jobs had a great point. He’s saying, “Hey guys, there’s a lot of innovation here going on and we have a huge research and development department and we’re generating some fantastic products that are going to make us a ton of money. We need all the capital available to us,” and that’s great.

Some companies out there especially in the technology field, which is why I don’t have a lot of investments in technology that need a lot of their capital because technology changes all the time, there’s a ton of research and development in it and they need to grow, they need to compete and everything else.

Comparing that to a company again like Coca-Cola, they don’t need to grow all that much. They don’t need to innovate all that much. Orange juice hasn’t changed in 50 years. Coca-Cola hasn’t changed in a very long time. So the amount of research and development necessary for Coca-Cola it’s just not a capital intensive business. For Coca-Cola to start taking all that money and try to grow with it, you can make an argument maybe they could, but I would make an argument that they can’t and that’s why they’re returning that capital.

Management is basically saying, “There is not a lot of innovation necessary here. We’re in a dominant position, we got our brand power, we’re going to keep some money aside for marketing. We’re going to keep some money aside for a little bit of innovation, try to develop some carbonated soft drinks that are not so high on calories, we’re acquiring equity in new exciting businesses but all these capital, all these billions of dollars sitting over here, we just don’t need it.”

And so do you want them incinerating it or do want them returning it to you as shareholders. I’d prefer the later scenario so again, speaking to Warren Buffett how that’s another good example. Again, Warren Buffett is probably so famous because he’s such an excellent capital allocator. Does every business have a Warren Buffett helming the ship? I would make the argument that they don’t. Warren Buffet is a specific case. However, speaking more to Warren Buffett, I prefer to invest like Warren Buffett does, and not as how — it’s a case of “do as I say not as I do”, right?

[1:09:04] JF: So, Warren Buffett invests in Coca-Cola. He invest in companies like Exon Mobile. Almost the entire portfolio that’s public, that’s Berkshire’s $100 billion plus investment portfolio, almost every single company on their pays and grows dividends. So he’s collecting that cash flow, that capital and he’s just an excellent capital allocator.

He’s just kind of a god among us, right? But he’s taking that capital and allocating it in the best way he sees fit. So he’s saying, “Hey guys, I don’t want to pay dividends because I can allocate this capital but I want to collect the dividends so that I can allocate that capital.” So it’s an interesting scenario there.

Again, I wouldn’t prefer to compare myself to Warren Buffet because I am not running a $300 billion company with massive insurance operations and a folio and locomotive company and everything else. But if you’re looking at it from the individual standpoint and on a micro level, you have to ask yourself, do you want cash flow or do you not want cash flow and what’s the best way to get that cash flow?

Again, I do dividends is the best way to get that cash flow because what I was talking about earlier, bypassing the market is a very tax efficient way to collect income and again, you don’t need to sell any equity but with Steve Jobs and Warren Buffett and all these other companies that don’t pay dividends, those are a couple of great examples.

But there is also a lot of companies out there that don’t pay dividends and aren’t able to grow earnings and everything else like Amazon is a great example. I think they just had a horrible quarter, they’re not profitable, so as a business owner, you’ve got to say, “Okay, well Amazon is not paying a dividend and they’re not increasing profit so where are we going here? What exactly is happening here?”

They came out with a phone they tried to innovate. It was a dud, so there’s examples on either side of the coin but I look at it as, you’ve got to look at the type of company you’re talking about too. You’ve got to look at mature companies versus companies that are just starting out. A company that’s very new probably needs a lot more capital versus a company that’s worth two or $300 billion dollars and doesn’t have the type of growth opportunities that a young company had.

And you also got to look at who’s helming the ship. You’ve got to look at what kind of industry they’re in. Again, technology is an industry where it’s hard to payout rising dividends every single year because of the competition, because of the innovation, because you need research and development and again that’s why I don’t have a lot of investments in the technology field. But when we’re talking about companies like Colgate and Proctor & Gamble, there is just so many growth opportunities they have.

They need to go somewhere with that cash and so if you were to allow management to not pay dividends. Say, “Hey management of Proctor & Gamble, hey Indra Nooyi of Pepsi, I don’t want you to pay me a dividend anymore. I just want you to grow all that cash.” And so you’ve got to rely on Indra and the board of directors to go somewhere with that cash but where do they go?

How many lines of chips can they possibly come up with? How many lines of beverages can they come out with before they start acquiring companies that are completely unrelated to their business or they just start making poor decisions? So it’s just the same as you and I. If you have $5,000 to your name, if you earn $5,000 a month, you have to be pretty careful with that money. You have to be pretty careful with your capital allocation decisions.

You have to be very prudent with the type of home you live in, with the type of car you drive and you have to create a gap between income and expenses in order to become financially independent. Now, if you raise your income level to $20,000 a month, all of a sudden you don’t have to be very careful anymore. You can go out to restaurants every single day, you can live in a much nicer house and so all of a sudden the decision making process there becomes quite a bit looser. So that’s kind of where I look at it.

[1:12:35] JS: Yeah. We’ve lost very much, even in people who pay attention to investments and to financial topics, we’ve really lost a lot of the traditional conversations around companies and types of companies. So there’s been a massive transition from the ownership of individual companies to the ownership of mutual funds and investing through mutual funds.

So traditionally, this is why you would get into, why we have the term “blue chip”. Blue Chip company is a large established stable company, likely a dividend payer that you could count on for income. You didn’t go to a Blue Chip to say, “Where is going to be my 600% possible rate of return with this massive new technology they’re coming out?”

Blue Chip is where you went when you wanted safety security and income and it makes all the sense in the world that a Coca-Cola — is there some innovative thing that they can do? Probably. But it’s probably more incremental and it’s probably more just simply buying something that buying a business that has been proven.

Like for example, didn’t McDonald’s buy Chipotle? I can’t remember that. Do you know? I was thinking of that as an example and I am not familiar with the facts on it but it’s more likely that a larger company will use its’ cash to buy some innovative company that they see has a lot of potential like in the two Coca-Cola examples you mentioned.

[1:14:03] JS: Right and that can be major growth but it’s more suited for a company that’s stable and however, if you are growing Papa Jason’s Pizza or if you were growing, like you mentioned, a restaurant franchise that was new, you would need to capitalize on the market so it doesn’t make sense for you to be spending dividends out when you’ve got a massive growth opportunity if you reinvest in the business.

So we’ve just lost in our common culture because there’s this transition away from investing in individual stocks and now we primarily invest through mutual funds. A lot of us have lost this ability to speak intelligently, the language of investing and the language of these companies.

[1:14:44] JF: Right. Yeah, exactly. And I mean companies like that, McDonald’s had Chipotle at one point and they eventually allowed them to become an independent company much to their chagrin I’m sure.

[1:14:56] JF: But yeah, Coca-Cola exactly, those were two bolt on, not really acquisitions. They just bought equity in these two businesses and they have the right to increase in that later date but yeah, there’s limited growth. To paint everything with a real broad brush like that, no dividend, all dividend, all retained earnings, no retained earnings, and this and that.

In my opinion, it’s just not the right way to look at it. Some companies are probably better off without paying a dividend. As you’ve stated, a very small companies growing at a very attractive rate and it needs all the capital they could possibly get their hands on to take advantage of the market they’re in, then yeah, obviously but again, you’re not talking about a Blue Chip at that point.

You’re not talking about a company that’s stable and established, it’s built up 20 or 30 years of dividend increases and it’s not that kind of company that you might be able to sleep well at night and wake up in the morning and know that they’re still going to be completely intact. This might be a company that might make a wrong move or might make a decision that, “I don’t know” or might crash and burn. Because they’re trying to grow too quickly and they take on too much leverage and everything else.

So the companies that I prescribe and the companies that I put my money where my mouth is and personally invest in are companies that I can sleep well at night owning. I can sleep well at night knowing that Procter & Gamble are still going to be doing their thing. Obviously, I have some investments and they are kind of spicing things up as well.

I have an investment in very tiny food company based out in California named Armanino Foods. They do some organic meatballs and pasta sauces and things like that and they are a tiny company. I think they’re $60 million, but even this tiny little company pays a dividend and grows it every single year while still growing at double digit rate.

So the point that even all tiny companies can’t pay dividends, can’t grow dividends is really incorrect in my view. It just depends on the management, it depends on the company, it depends on the market.

[1:16:40] JS: In many ways, you can simplistically just simply view a dividend as keeping management accountable for actually making money and again, Amazon is a fascinating example of an investment case study. They don’t actually make money. They’re actually not profitable and so just because they do a lot of business doesn’t mean that the owners are actually making money and this is a very interesting — I’m enjoying watching it because it’s a fun case study to watch develop as time goes forward. It fascinates me.

I’d like to close with one question and I’ll give you two ways that you can answer it. I think about this a lot with respect to my son. I have a one year old son and I think about how to teach him about investing and I probably will use, I’m keeping my eye out for some brands that will, I don’t like to allow a lot of the brands that many people would have in their houses into my house.

I don’t like the marketing influence. We don’t eat a lot of processed foods and things like that and I don’t like many of the medium brands so I keep a lot of those things out of my house. But I’m trying to keep an eye out for some companies that he will probably become brand aware of and then I will probably try to use dividends, because of the tangible nature of the cash flow, to teach him the topic of investing and so I am keeping an eye out for that.

So how would you, if you were going back, knowing what you know, what path would you take to learn more about financial independence and dividend investing and again, you can answer it either or both towards teaching a young person, a middle school or something like that and then also towards an adult who’s trying to follow a similar path to yours?

[1:18:37] JF: Well, that’s difficult. I mean I guess I’m in the position where I am teaching others through my writing and through blogging and everything else and the audience that I’ve been able to recruit or generate or what have you has been wonderful. A lot of people who have stopped by the site, they are incredible people, very, very kind, very generous and they’re also thankful for me showing what this path looks like in real time.

Because a lot of personal finance experts in the world, they kind of say, “Well, this is what I did 20 years ago,” or, “This is what I did 30 years ago,” and they’re talking about things that have already happened. Whereas I’m showing everything in real time and I think that’s where the value of my writing and the blog and my journey and everything else really is at, is showing everything in real time. If I were to go back and teach somebody how to do everything from the beginning, it would be hard to paint the broad brush and teach a large slab of people at one time.

It’s really just getting down to the fundamental basis of what you want out of life and regardless of how you invest your free capital, again whether that being an index investing or mutual funds or your dividend growth stocks or what have you, the real main point is wanting more out of life than just working the nine to five until 65 kind of routine and kind of running endlessly on this rat wheel and not seeing that there’s more to life out there.

One of the things that I really love is the famous allegory, the cave by Plato where you have these people sitting in the cave and they’re chained up and they’re looking at shadow puppets or shadow figures on the wall and to them that’s life. They see this is life and they are technically being controlled by chains, which you could make that jump in a number in different ways. The chains are debt and things like that.

But they are sitting on the cave floor and looking at these puppet figures on the wall because there’s a fire behind them and these people behind them making these hand puppets and everything else and to them, that’s life. To them that’s everything. Then you got somebody who escapes from the cave and they walk out into the real world and they’re blinded by the light and everything else at first. But after a while, they say, “Wow, there’s a lot more out here than just these dancing flame figures on the wall.”

And that’s what I would talk about if I were to teach somebody, it’s to say, “Hey, if you’re comfortable with working nine to five until you’re 65. If you’re comfortable with the big house and the big car and everything then more power to you my friend but I want you to really ask yourself, are you happy with that? Are you really happy every morning when you hit that alarm clock and you march down the office? Are you really happy with the way your life is right now?”

Because the scientists have done all the hard work for us. They’ve already discovered through countless studies that once you get to a certain income level, call it $50 grand or so a year and money, the incremental increase is in money don’t also result to corresponding incremental increases in happiness. So you’ve got to start looking at money in a new way. I look at money as money allows me to buy time.

They say time is money. I say money is time. Time is time, time is life, time is everything. Without time, you have nothing. Without time, you’re basically not alive anymore and it doesn’t matter how much money you have. So when you really want to think about where you want to be in life and when you think about success and everything else, I look at success, I look at happiness as autonomy, as freedom, as the ability to create for myself, as the ability to do what I want, when I want, set my own schedule but money itself, objects and things like that that we consume ourselves with are not the driving factor behind happiness.

So I think people really need to take a step back and really think about what do they really want out of life and when I think about all the happiest memories I’ve ever had in my life, it was never buying a brand new car. It was never getting a new place to live. It was never that shopping trip at the mall or whatever. It was the times I had with people that I care about. It was intimate moments I had with people that I love. It was time, it was memories, it was experiences. It wasn’t stuff.

So when you start thinking about that, when you have that paradigm shift in terms of what life is all about and what money can truly be used for, then you can get on the band wagon or you can kind of get on the investing train of starting to put capital to use for you and instead of working for money, have money work for you. There’s a wide variety of ways you can get money to work for you.

I prescribe one way that I feel is really wonderful, but you can really go about it in any way you choose but really, the heart of my message isn’t just dividend investing. The heart of my message is to be happy and to attain happiness and I think true happiness is attained through true freedom. Where you’re not running on a wheel all day long and you’re not clocking in and clocking out when somebody tells you to.

You’re not eating when somebody else tells you to, you take a week’s vacation when somebody tells you and you go to some all-inclusive resort where you’re not experiencing the local culture. You are just trying to get away from the office a little while. True happiness is living your life on your terms, irrespective of money and that’s what I really try to talk about.

[1:24:03] JS: Time is the only non-renewable resource and money is a very renewable resource.

[1:24:09] JS: Plenty of it floating around. Jason, thank you for coming on. I think this has been one of the better interviews and I think more pithy interviews that I’ve done in a while and I really appreciate your giving the audience some insight and encouragement and inspiration. I think it’s an incredibly valuable resource and I appreciate you making the time for it.

[1:24:35] JS: Pretty cool to see that an ordinary guy can make it happen, right? I’m telling you, finance is simple. Not easy, but it’s simple. There are really very few secrets to becoming financially independent. It’s just a matter of hard work, thrift, industriousness, wise investing and there’s just some very simple things that need to be followed on a consistent basis and if you’ll follow them, I think you can make excellent progress.

I hope that you learned and enjoyed this very practical information on dividend growth stock investing. It’s an excellent strategy for financial planning and for financial independence. It’s a well-worn time proven strategy that anybody really can follow. So I hope that you found this information educational and enlightening as always.

That’s it for today’s show. Tomorrow, I’m going to be releasing an interview that I have done with Chris from Eatthefinancialelephant.com. Another man and his wife and his family who are pursuing financial independence. They’re right on the path to doing so and I think they’ve got another very accessible story that I think is inspiring.

He’s going to share some of the lessons that he’s learned, some of the things that he’s done well and also some of the mistakes that he’s made, some of the things that he hasn’t done well. I hope you like these interviews. I’m trying to really strike a balance between interviewing experts and also interviewing people who don’t hold themselves out to be experts.

I get so annoyed at just hearing experts all the time because sometimes, experts are unrelateable. If they can share some valuable information that’s helpful but sometimes unrelateable. So I’m trying to bring you a diverse body of interviews on diverse topics from diverse people. If you are interested on coming on the show, shoot me an e-mail, joshua@radicalpersonalfinance.com.

I’m happy to have individual lay people who are right on the path, people who are learning, people who are knowledgeable. I’m willing to consider all types of people to bring in the show. So that’s tomorrow’s show. Friday, I’ll be doing a Q&A show. I’ve received a few questions, call in those questions on the voicemail line on the website if you’d like me to answer your question on a Friday Q&A show.

Next week, we will be releasing some more interviews and on Monday, I think I’m going to be continuing the education series and then on Tuesday, episode 100, I plan to roll out a membership portion of this program. It will all be voluntary, in case you haven’t figured that out, voluntarism is a big deal to me.

So the show will continue to be here for free but if you’re benefiting from the show and you’re enjoying the show and you would like to support me financially, I’m going to roll out a win-win-win program that will be a win for all of us and I’ll describe the details of that. It will be slow and starting but that’s going to be the primary plan that I have to grow the show overtime. So check back for that on Tuesday, episode 100 and have a great day everybody.

[FINAL MESSAGE]

[1:27:39] JS: Thank you for listening to today’s show. This show is intended to provide entertainment, education and financial enlightenment. Your situation is unique and I cannot deliver any actionable advice without knowing anything about you. This show is not and is not intended to be any form of financial advice.

Please, develop a team of professional advisers who you find to be caring, competent and trustworthy and consult them because they are the ones who can understand your specific needs, your specific goals and provide specific answers to your questions. Hold them accountable for your results.

I’ve done my absolute best to be clear and accurate in today’s show but I’m one person and I make mistakes. If you spot a mistake in something I’ve said, please come by the show page and comment so we can all learn together. Until tomorrow, thanks for being here.

7 Comments

Terry
on November 6, 2014 at 11:17 am

I really enjoyed this podcast as it is something that I’ve considered. I ended up going the Index fund route through Vanguard instead. I like the idea of living off of the money coming in rather than selling off stocks to live…but I’ve had some concerns.

Here are some of my concerns:
1. Expense ratio is greater for a dividend funds (I tried investing in individual funds and it wasn’t for me). I currently have about $15,000 in the Vanguard Dividend Growth Fund and the rest is in Index funds.
2. Aren’t dividends taxed at a higher rate?
3. My growth rate on my Dividend fund are good, but lower than my Index funds.

I plan on being financially independent in 3-4 years. I’m considering moving money into dividend funds at that point and then living off the dividends. Do you have any thoughts on this idea?

I realize that I probably need to do more research into the dividend funds available through Vanguard (I want to keep everything in one place for simplicity). It also wouldn’t hurt to listen to your podcast a second time.

Thanks for everything you put into your podcast. It has been a great resource. It is both challenging and encouraging.

I didn’t understand the part about the dividends being tax free. Can someone explain that?

I looked on his website and saw an article where he talks about the fact that with individual stocks there is a onetime commission but no annual management fees like mutual funds have, which is a point I had never considered before.

Dividends are only tax-free if your marginal tax rate is 15% or less. So, in 2014, if you’re single and make 36,900 or less, you don’t pay taxes on long-term capital gains or dividends. I think the point he was making is that if you retire and don’t have earned income, but only dividend income, you can make 36,900 without paying taxes. But even if you are in a higher tax bracket, dividends only get taxed at 15% I think. Which would be less than your marginal rate.

Hi Joshua,
I had a pretty funny thing happen to me last weekend that I thought you’d appreciate. I was visiting my brother in Sarasota FL (I’m from Eastern Canada), so I took the bike to the downtown market. While I was biking I had my headphones in listening to my favorite podcast “Radical Personal Finance” and the episode was “Financial Independence via Dividend Investing”, your interview with Jason Feiber who writes at DividendMantra.com. Along with having an interesting story, what also caught my attention was that he was from Sarasota.

It was a real good interview so when I returned from my bike ride I checked out his website. Along with some great content on his site, there was a picture of him on his About Me page.

Jump ahead to Sunday, My brother, his wife and I decide to go to the big AMC theater to watch a movie. We find our cinema (1 of 12) and then walk in to try and find a seat. The place was quite full but we managed to spot 3 seats together in the back row so we grabbed them. When I sat down, I thought the guy sitting next to me looked familiar. It only took me a minute to realize where I think I saw him. Curiosity got the best of me and I had to ask him… “This is going to sound strange but do you write the Dividend Mantra blog?” To my surprise he said “Yes”! I explained that I listened to him for 90 minutes the day before and had spent some time going through his site. He explained that it was the first time anyone had “recognized” him as the world of financial independence blogging isn’t exactly Hollywood. 🙂 He mentioned that he enjoyed doing your podcast and was a little concerned he got a little overly excited talking dividend investing. 😉

Sunday night I left a comment on his blog explaining that it was nice meeting him and his fiance and I offered to take him out to lunch before I flew home on Thursday. He wrote me back and and we made arrangement to meet at McDonalds (his suggestion as MCD is a dividend stock he owns!) on Tuesday. I met him at McDonalds, who as luck would have it, were having their customer appreciation day. I got a Big Mac for me and another one for Jason for 1 cent! My total lunch bill was $7.40… A great lesson in being frugal! We ended up sitting in McDonalds chatting for 3 hours! He is such a great guy. It was the first time in my life that I had ever met someone in person that was on the exact same path as me (actively pursuing early financial independence). We read many the same books, followed many of the same blogs and for the most part seemed to think the same way. He also makes a pretty good case for dividend investing too!

Crazy odds! Jason is now “famous” from his appearance on The Radical Personal Finance podcast with Joshua Sheets! It really was an excellent interview. Keep up the great work! If I ever make it to your neck of Florida I’ll take you out to lunch too! 🙂

What a cool story! That makes me feel super cool that a connection was made through my show. Thanks for sharing the story! I hope that you guys are able to keep a friendship going and be a help and encouragement to each other! That’s one thing that’s neat about the internet…it’s so much easier to connect with like-minded people. And when you meet someone, you feel like you could be old friends.

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